1. 1
Cutting Your Costs and Avoiding Bankruptcy:
The Case for the Virtual Law Office
“We’re Going Bankrupt”
November 30, 2013
Centre for Health & Safety Innovation
5110 Creekbank Road, Mississauga, ON L4W 0A1
Omar Ha-Redeye
Lawyer, Fleet Street Law
Contract Faculty, Centennial College
6. What is a Virtual Law Office?
• strict definition: client-lawyer interaction that
occurs in an online space
–Also known as eLawyering or Virtual Law Services
–Only become practical in recent years
• common definition: defined by how a law
practice is organized and less on how the
legal services are offered to clients
–Focus on firm structure, in addition to the delivery
of services
7. Why a Virtual Law Office?
• Legal disruption due to 2008 recession
– Displaced lawyers and paralegals; firms looking to alternative
structures; lawyers and paralegals looking for alternatives
• Creates considerable flexibility to start-up law practices
– Minimize rent overhead and staff expenses, two major fixed costs
for any business
– Allows for blended structures, relying on others in association or
chambers to offset overhead costs
– Provides a competitive advantage to the small and solo
practitioners, and for paralegals
28. Contrasting Different Models
Strictly In-
home
Rented Virtual Office
(Generic)
Rented Virtual Law
Office
Features
Cost
Most
inexpensive Most expensive Usually in between
Storage space Most limited Usually none or limited More flexible
Work efficiency
High level of
distractions
Lots of quiet work
space
Often subject to
availability
Communication
Options Low to Medium Medium to High Medium to High
Meeting Space None High Medium to High
Practice support Very low Low Medium to High
29. Models of Virtual Law Offices
and Blended Models
• Hybrid model provides access to training areas and boardrooms
• Complex legal work may not appear as conducive to the virtual
office
– interdisciplinary in nature or require input from several different legal
specialities,
– ad-hoc and strategic alliances with other practitioners or established
firms can allow for the work to be shared
• Include this arrangement in the retainer agreement
• attach a virtual office to a more traditional firm as an “of-
counsel”
– allow for strategic use of firm resources while still retaining
independence and flexibility.
– may require certain non-compete or non-solicitation agreements,
providing their own limitations
37. Limitations of a Virtual Law
Office
• Working out of home has its own unique
challenges
–Lack of workspace and storage
–Interruptions and distractions due to personal chores
and family responsibilities
• Some practice areas heavily dependent on face-
to-face communication
–Litigation is still an in-person profession
• court appearances still require proximity to the court house
• know-your-client requirements require special attention for
out of jurisdiction clients
– Mediation practices
– Litigation coaching
38. The Technology is New, The
Concept is Not
• First virtual law office in 1996 by Andew Woolley
in England
1. stable core group of lawyers with a
collaborative relationship
2. held together through technology and using
flexible support staff needs
• Tradition of semi-independent barristers in
England going back to the Inns of Court
–The practices remain separate, but barristers may
share staff resources and assist each other with files
–Sufficient confidentiality to allow lawyers in the same
chambers to act on both sides
40. What’s Needed to Go Virtual?
• ☑Got Some Attitude
• ☑ Got Mobile
• ☑Got Communications
• ☑Got Surge Capacity
• ☑Got Google Juice
• See paper, “Virtual Offices Provide Promising
Opportunities”
45. Practice Management
• Practice management services
• Reporting
• Contact & Conflicts
• Time Tracking & Billing
• Import / Export
• Updating
46. Comparing the Costs of Practice
Management Software
• “Comparing the Costs: Analyzing the total cost of ownership of Clio vs. traditional desktop
practice management solutions.”
http://www.goclio.com/resources/white_papers/Comparing%20the%20Costs.pdf
When looking at traditional law firm structure, we see a very familiar pyramid, hierarchical structure.
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At the lower levels are staff and junior associates.
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In the middle are associates.
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And at the top are a few equity partners.
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And all the money made by the firm…
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Defies gravity and is totally under the control of the partners in the firm.
The total control of law firm funds by partners has dictated how law firms traditionally operate.
Partners decide both major and minor work flow decisions for the company, including:
The location of the firm
The tools used by the firm
And staffing trends and usage.
Over time, as firms grow and solidify, the decisions by partners stagnate firms. These firms are weighed down by a legacy of decisions that may no longer be appropriate for the current legal environment.
The trappings of the traditional law firm have become a trap.
Let’s turn that model on it’s head.
A virtual law firm is a law firm, run by a lawyer or group of lawyers, that meets the legal needs of its clients securely over the Internet and through other technological tools.
It doesn’t exist in place, but instead exists in the connections and communications between lawyers and clients.
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The use of technological tools means that virtual law firms break the chains of law firm life.
Lawyers in virtual law firms can practice from anywhere that they have access to the tools that make up the firm.
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This means some virtual lawyers may still work in an office environment.
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Others can work from home.
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While others may choose open environments like coffee shops and co-working locations.
This is especially advantageous to lawyers who want to balance their personal and professional life.
For example, virtual law firm Heritage Law out of British Columbia was founded with a workplace culture that allows its lawyers to work flexible hours to let them spend time with their families, using technology to keep them productive outside of the office.
The flexibility of virtual law firms can create a huge pool of talent eager to work, that have been shut out of traditional firm structures
Law firms have traditionally been state-based entities.
Governed by both court rules and business formation law, law firms are shaped by these forces where ever they form.
In the past, adding a new jurisdiction meant sending lawyers from your firm to the state, qualifying for practice, obtaining property and opening an office.
Virtual law firms can divorce themselves from these steps. Instead, they can add a lawyer already licensed in that state or just obtain reciprocity.
In fact, In most states, you no longer need a physical address in that state from which to practice.
For example, in Feb. of this year, New Jersey changed Rule 1:21-1 of the Rules Governing the Courts Of the State Of New Jersey. Easing the bona fide office rule, lawyers practicing in NJ now merely need to insure proper communication channels with the Court and designate an agent to receive service.
You’ve lawyers that no longer have an office. They can practice from home, the beach, another state.
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It literally opens the map to where you can practice and whom you can add to your own virtual law firm.
Clients have always expressed a desire for a full-service lawyer.
Yet when it comes to solo and small firms, the glass always seems half-empty.
Clients find a law firm they like and trust, clients want their law firm to handle all their legal work – and then they that the law firm can’t
Lawyers and firms specialize in particular practice areas. Offering mastery built over years of experience.
A client comes to you with a matter outside of your core expertise, and professional ethics compels you to send that client back out the door.
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Virtual law firms provide the opportunity to meet that client’s needs and keep them in your firm, by adding members to your virtual law firm that complement your practice areas.
The communication tools and techniques of virtual law firms keep clients in a network that can handle their every need without any one lawyer having to know everything and do everything for that one client.
The average square footage per lawyer for a law office designed for 25 lawyers is typically 800 to 850 square feet. For an office designed for 100 lawyers it is about 650 to 700 square feet.
NY Rent is $53.72/square foot.
NY law firm rent ranges from $35K to $45K per lawyer per month.
KC rent is $16 / square foot.
KC law firm rent is $11K to $13K
In 2008, the average office space per person was about 250 square feet. Now, the average is 150 square
That would make rent only Only $8,058 in Manhattan & $2400 in KC.
The question you should be asking yourself is why are you paying rent to begin with? Is it meeting rooms and place to store your books? Later we’ll look at some alternatives that can get you the same features for less.
But it is not just real estate that drive up the cost of lawyers.
Large firms spend $8-17K on IT per attorney.
2012 International legal technology assoc. (ILTA) Technology Purchasing Survey
Using virtual law firm technology would allow firms to utilize existing consumer technology like the smartphones, laptops, and tablets we already own, rather than having to invest in larger scale technology implementations. It also gives the members of virtual law firms the benefit of using their preferred technology, Mac or PC.
Technology can even reduce staffing costs
Paralegals median pay was $46,680 per year.
Legal secretaries median pay was $42,460
But you can use technology to hire virtual assistants that can cover your needs at a fraction of the costs.
90% of large law firms passed on the costs of incidentals to their clients. Eliminate those costs and you create better service for your clients.
Examples of rent in downtown Toronto
An average, up to 80% of a lawyer’s work can come from referrals.
But for solo and small firms, you can quickly exhaust the network your friends, family, and clients provide.
Virtual law firms let your build a professional network that expands with each new member in your firm.
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And as we’ve seen with social media, network growth is geometric in scale. The more you add, the faster it grows.
The last benefit of virtual law firms is their flexibility in timing.
In the late 70s and early 80s, car manufacturers began implementing a “Just in Time” inventory process.
The Just in Time system looks at when an item is needed in the manufacturing process and times its entry into the process.
Manufacturers saved money by not paying for parts they did not immediately need and then having to pay to store those unnecessary parts.
In the 90’s, electronics manufacturers began implementing this process as well.
The practice of law is late to catch on to business practices that have existed for decades.
But technology is finally allowing virtual law firms to use Just in Time hiring to compete effectively against larger law firms.
Traditional law firms do their hiring on a yearly basis, gambling that a fresh batch of law school graduates will provide exactly the skills and expertise they need for years to come.
Virtual Law Firms can quickly and easily add a new member to meet a gap in their offerings.
Virtual law firms with the right tools can even bring in the right attorneys when a matter requires it
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and then readjust at the end of the case.
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This allows them the ability cover a new jurisdiction.
Or a practice area.
Or to expand networks and market opportunities.
Allowing virtual law firms to break out of the traditional law firm.
And be their own free agents, soaring from opportunity to opportunity.
Partnerships are that traditional method of organizing law firms and they do have a lot of benefits.
Issues such as file ownership, shared costs, and conflict checking are already settled by the strong rules and standards set by decades of regulation.
The real difference between traditional law firms and virtual law firm partnerships is a question of spending priorities.
Virtual law firm partnerships will prefer to spend money on tools rather than trappings.
While the partnership itself is not that dynamic a construction, focusing on reactive communications tools can still allow partnerships to gain the benefits of virtual law firms.
They can also form the core of several other models virtual law firms.
The Hub and Spoke method is the fastest growing type of virtual law firm.
At its center is a core team that may even be a traditional partnership.
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This core team builds a network of independent contractors, lawyers that can help with specific subject matters and jurisdictions.
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Work is sent to the contractors as it develops, with the core team handling assignments and customer interaction.
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When work is complete, the firm ends the project and keeps the contractor on file for when more work develops.
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But even the network of contractors is flexible, with some being able to enter and exit as necessary.
Examples include:
Cognition LLP of Toronto
Custom Counsel LLC operating in New England, Washington DC, and parts of the Midwest
Our special guest speaker’s firm Berger Legal LLC
We’re just beginning to see the rise of branded networks.
The first example of this is AXIOM Law, as service that recruits experienced lawyers and then places them in insourced and outsourced roles with clients.
The lawyers are employees of Axiom, but they are not associates or partners in the normal sense. The are paid like contractors, only receiving payment when on assignment.
This is much more akin to consulting, as practiced by the big firms like McKinsey or Boston Consulting Group.
A more relatable example is Bliss Lawyers, a branded network formed by our guest, Garry Berger. We’ll turn to him in a second to discuss how Bliss Lawyers is organized and how it recruits and places lawyers inside various companies.
These are corporate entities that market legal services and then hand them out to pre-qualified lawyers.
Lawyers can create their own branded networks, so long as they abide by their states’ rules on reciprocal fee arrangements.
“An attorney may enter into reciprocal referral arrangements with another attorney or a non-attorney professional so long as the arrangement does not violate any other Rules, including interference with the attorney’s professional independence. To comply with Rule 7.2 for a reciprocal referral agreement, the agreement must not be exclusive, and the client must be informed of the existence and nature of the agreement. Model Rule 7.2(b)(4). Any fee sharing/splitting under these agreements must comply with Rule 1.5(e).”
Also, let’s remember that these organizational methods are not mutually exclusive.
You can have a partnership that
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Uses independent contractors, and
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May even be part of a larger network.
We’re already seeing these changes in how law firms operate overseas. For example, in the UK, Quality Solicitors is setting up a law firm franchise system, that is the front for over 100 firms.
There are several concerns that lawyers must consider when planning their own virtual law firms.
All of these concerns arise from ethical and professional duties associated with being an officer of the court.
Let’s look at these issues.
Virtual law firms must be wary of the responsibilities surrounding attorney-client relationships.
Those following the partnership model already have clear guidelines on ownership.
Those operating as Hub and Spokes or Branded Networks need to clearly convey who owns the client, both to the client and the lawyers working on the file.
These same concerns also need to be addressed when it comes to file transfer and retention. Policies need to be clearly established where the file is to be ultimately “stored.”
Beyond that, the distributed nature of the clients and virtual law firms raises a unique issue. VLF need to take steps that they are communicating with the proper client. This means taking extra steps to confirm identity and to rely on secure messaging technologies.
Fee splitting is another area that can pose a danger for a virtual law firm.
Splitting fees among a partnership is the normal method.
But when it comes to Hub and Spoke or Branded Networks, VLFs must take that they do not run afoul of regulations that limit fee splitting based on the proportion of work done and consent of the client.
Lastly, I was asked by an attendee on how to create a virtual law firm that shares fees with non-lawyers.
This is prohibited.
In order to protect the independent judgment of lawyers, they cannot share fees with non-lawyers. You may be able to hire their services, but you cannot share a fee.
The Model Rules generally prohibit an attorney from paying another to recommend an attorney’s services (“channeling”), unless the exceptions under Rule 7.2(b)(1) apply. Mode Rule 7.2, Comment 5.
For example, Rule 7.2’s proscription does not apply to an attorney’s payment for advertising and communications to “channel” work, so long as the advertising and communications otherwise comply with the Model Rules. Model Rule 7.2, Comment 5.
The classic “referral fee,” whereby an attorney receives a fee for the referral of a case to another, is a form of fee sharing/fee splitting. Attorneys who are not in the same firm may share/split fees only if (1) the division is proportionate to the work performed, or each attorney assumes joint responsibility; (2) the client agrees in writing, including agreement about the share to be received by each attorney; and (3) the total fee is reasonable. Model Rule 1.5(e).
An attorney may enter into reciprocal referral arrangements with another attorney or a non-attorney professional so long as the arrangement does not violate any other Rules, including interference with the attorney’s professional independence. To comply with Rule 7.2 for a reciprocal referral agreement, the agreement must not be exclusive, and the client must be informed of the existence and nature of the agreement. Model Rule 7.2(b)(4). Any fee sharing/splitting under these agreements must comply with Rule 1.5(e).
Model Rule 5.4 generally prohibits sharing fees with non-lawyers.
(b) Model Rule 5.4 generally prohibits sharing fees with non-lawyers.
(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if:
(1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;
(2) a nonlawyer is a corporate director or officer thereof or occupies the position of similar responsibility in any form of association other than a corporation ; or
(3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.
Insurance coverage depends on the structure of your firm.
Traditional structures are easily covered by professional liability insurance.
Other models need to consider corporate liability insurance and make sure that they declare activities and changes to their insurance companies.
Also, if using contractors, make sure your insurance covers their activities.
It’s important to keep advertising of your firm’s advertising truthful and in compliance with rules of every state in which you operate.
Nothing false or misleading.
And while it is easy for VLFS to claim that you have nationwide coverage on every practice area, as lawyers we are not allowed to get away with advertising through fine print disclosures. Only advertise those areas your firm presently covers.
Also make sure you understand the retention rules that apply in these states as well for advertising. For example, some states require copies of advertisements to be kept for 2 years, some only for 1 year.
Standards and mentorship are two areas that seems to be falling by the wayside in large law firms.
Cut and paste activities with no career development is becoming the norm.
VLFS can combat this trend by using tools that give transparency in the firm and towards their clients, keeping automated records of activities and performance.
These same tools can be used to train interns and law clerks, people easily added in the dynamic technology environment of VLFS.
Lastly, clients need to know where to turn for their files. VLFS need to have a business plan that creates a lasting method for connecting and communicating with their clients.
☑Got Some Attitude
Lawyers tend to gauge success by approximating their career path against those of other lawyers
cost of their oak table, the view from their office and how high their billable hour is
virtual lawyer can use entirely different indicators of success
work-life balance, client satisfaction and the promotion of access to justice
virtual lawyer is willing to challenge norms and explore new frontiers
treat their practices as ongoing experiments rather than just relying on published and agreed upon best practices
☑ Got Mobile
Popularity of legal accounting software hosted entirely in the cloud
Clio named one of the fastest growing companies in B.C. in 2013
New PCLaw 13 (July 2013) offers 24/7 Remote & Mobile Connectivity
High-speed scanners are a necessity
Document access on the go
Virtual library provides time efficiencies
Explore apps to enhance productivity
Emerging legal-specific apps
E-books are indispensable
☑Got Communications
Smartphones allow making calls on the go, but query whether you want all of your clients to have your personal cell phone number
Instead, VOiP extension can be seamlessly forwarded to a personal cellphone or home office line
customizable and can be set only for certain hours of the day
Virtual Legal Assistants can provide a personal touch for clients
Consider confidentiality under Rule 2 of the Rules of Professional Conduct
Faxes are still a required component of practice for many areas
Digital faxes allow you to send and receive faxes electronically
Allow for quick collaboration with multiple authors, reduce the need to come in to a physical office to collect correspondence
☑Got Surge Capacity
Files frequently get larger or busier than anticipated
personal circumstances may limit how much work can be done on a file
absolutely essential for a virtual lawyer to have some plans in place
Limited power of attorney to continue a practice during a planned absence, or to act on your behalf in the event of illness, incapacity or disability
Establish infrastructure in advance
A buddy system with other virtual lawyers, an association, or larger firm
Independent research lawyers, virtual law clerks and process servers, document preparation, file review and drafting services
Greater emphasis on lawyer as a project manager or coordinator of resources
☑Got Google Juice
Develop a strong and robust online presence
Online directories and referral services
independent website a mandatory prerequisite
Blog, blog, blog. Then blog some more.
majority of clients either find virtual lawyers online or have researched their practice before signing the retainer agreement
1. Embrace technology to link and connect your virtual firm.
2. Lock up your phone number via one of the VOIP services. I use Ring Central. Each one of my staff has both a physical VOIP phone and access to the web based and iPhone applications for our virtual phone system. This gives them access to all of the functions on the go from conference call to voice mail to call forwarding to call forwarding and re-routing.
3. Get a permanent address through a temporary office suite service; I use Regus; I have an office and conference room a few blocks from my home office when I need one plus access to their worldwide network of offices. I have used their London and Hong Kong offices when traveling for meetings and marketing.
4. Set up a Cloud based document management system to provide easy access to all lawyers and staff to all firm key documents regarding office procedures, client files and documents needed for litigation and transactions. I use Box.com for this aspect of my practice because of its ease of use and administrative controls and security procedures.
5. Get a practice management solution that is in the Cloud for billing, time management and case file management: I use CLIO. CLIO can be linked to Box and has many features that puts you on the cutting edge. I have really only tapped the service so far of all of the capabilities of CLIO which is always implementing new features.
David C. McLauchlan, Esq.
Managing Partner
The McLauchlan Law Group, LLC
401 North Michigan Avenue Suite 1200
Chicago, Illinois 60611
Set your communications to cloud services so that you can route communications to you, no matter where you are. Most plans also eliminate long distance charges, so that even if you have to relocate, you can still be local.
VOIP services like SKYPE or Vonnage allow you to communicate with clients over the internet, using an internet connection to phone or video call a client.
Call Forwarding services, like Google Voice, networks the phone numbers you already use. Clients can call a single number and reach any phone to which you have access. You can even control the time and manner of the routing. In court? Set your phone to ‘do not disturb.’ Create personalized voice mail greetings for individual clients. You can even have your voicemails sent to you as emails or texts.
Email is already a tool you use, but have you considered social media?
With over a billion users on some sites, your clients will be looking for information on social media. Social media is a great way to communicate general information to blocks of clients & also for maintaining good client relationships with something as simple as a Like or a Retweet on a client’s birthday.
You can get a permanent address through a temporary office suite service
For example, Regus offers office and conference rooms in practically every major city. You can work in your home office , but still have access to their worldwide network of offices when you really need a conference table.
Also consider looking at Co-Working locations in your metro area. These are locally-run coops that offer a similar service – meeting space when you need it - but also can create a sense of community that many people find lacking when they work from their own homes.Fleet Street Law provides another alternative – virtual offices with other legal practitioners. This can provide mentoring, referral and other strategic advantages.
Set up a Cloud based document management system to provide easy access to all lawyers and staff to all firm key documents regarding office procedures, client files and documents needed for litigation and transactions.
Over a three-year period, it is clear that the Total
Cost of Ownership for Clio is significantly lower than
that of other desktop-based alternatives, such as
Time Matters, PC Law, and Amicus Attorney. Despite
differing acquisition costs, it is interesting to note
that the three desktop products average out to very
similar TCO numbers over time. In an economic sense,
this represents a mature market where the existing
vendors have benchmarked a willingness to pay among
consumers – more or less $10,000 over three years for
attorneys in small firms. With Clio, we can see that the
shift to a SaaS model allows a significantly lower TCO
over the same timeframe
Avoid the up front costs:
Ultimately, this translates into a total cost of ownership
scenario that is exhibited in the two graphs below. In the
first graph, we see the TCO for each product mapped out
over three years. Predictably, the total cost goes up with
each year as there are ongoing and operational costs
associated with each of the products. Clio’s low start-up
cost, coupled with its low ongoing costs, tip the TCO
comparison decisively in Clio’s favour
The second graph demonstrates a similar result
through a different analytical lens. In this graph, we see
a representation of the average annual cost (i.e. the
amortized TCO per year) for each product. Predictably,
the desktop software products are most expensive in
the first year and trend downward over time. In contrast,
the user fees for Clio stay constant year-over-year as
the subscription price is fixed. Even after a three-year
amortization period, the average cost per year for each
of the desktop-based products remains notably higher
than Clio
The right practice management system can tell you what has been done to a particular matter, by any attorney, no matter where they are located. Allowing you to be certain there are no slippages by lawyers working for you.
But also how it can tell you how the firm as a whole is performing, tracking key metrics like workloads and billing rates.
Make sure that your practice management system allows you to search the entire practice for conflict checks.
Jeffrey Allen, principal attorney at Graves & Allen, reviewed Clio for Technolawyer’s SmallLaw column.
Here’s his use of it in a virtual law practice setting.
His office is in California, but he took care of his billing from a hotel room in Chicago at the beginning of the month. It took him about five minutes to generate the bills, print them to PDF, and email them back to his assistant for distribution to clients.
One often overlooked area of practice management systems is the ability to import and export data.
If a VLF is serious about being agile on behalf of their clients, these functions give you the ability to quickly bring a file into your system or hand off files easily to clients at the end of egagements.
CLIO is one of two cloud providers that have been around for 5 years.
52 updates over the course of 2012 and no upgrade costs or price raises.
This has allowed the law firms that use our system to be up to date, everytime they open Clio. No matter where they are located.